Opinion on the draft decree on the regime for radio and television services shown by cable and satellite
French Superior Audiovisual Council opinion of October 23, 2001 on the draft decree establishing the regime applicable to the various categories of sound and television rebroadcasting services distributed by cable or shown by satellite
The French Superior Audiovisual Council (Conseil supérieur de l'audiovisuel) has been asked to give its opinion, pursuant to article 33 of law no. 86-1067 of September 30, 1986, as amended, on freedom of communication, on a draft decree laying down the rules applicable to the various categories of radio broadcasting and television services distributed by cable or shown by satellite, having considered the matter, makes the following observations, which should be supplemented by the main observations set out in its opinion of October 2, 2001 on the draft decree laying down the general principles governing the diffusion of services other than radio broadcast by terrestrial hertzian means in digital mode.
1. Audiovisual production
Article 9 of the draft decree sets out the obligations of services in terms of audiovisual production. This article summons comments from the Council on three points.
a) Threshold for showing audiovisual works
The first paragraph of Article 9(I) imposes audiovisual production obligations on "service editors who annually reserve more than 10% of their programming time for the diffusion of audiovisual works".
As mentioned in its opinion on the draft "digital" decree, the Conseil considers this threshold to be inappropriate, and recommends that it be set at 25% of programming time.
b) Production of new works
As it indicated in its opinion on the draft "digital" decree, the solution recommended by the Conseil to encourage the production of previously unseen works is to give it the option, by agreement, of negotiating with editors a specific commitment to the previously unseen production of European or original French-language works, in return for a reduction in the rates of cinematic and audiovisual production obligations.
Moreover, to avoid any ambiguity, the Council would like the two options provided for in the second paragraph of I of article 9 (setting in the agreement, on the one hand, specific obligations by genre and, on the other hand, a minimum annual volume of orders for new works) to be independent of each other and therefore to be the subject of separate paragraphs.
c) Independent production
Article 9 II of the draft decree sets the proportion of production expenditure to be allocated to independent production at two-thirds.
In its opinion on the draft "digital" decree, the Conseil indicated that it considered the criteria used to qualify independent production unsuitable for a number of publishers. This is particularly the case for cable and satellite service editors.
For example, in order to qualify as independent, audiovisual works co-produced by cable and satellite services can only be shown three times over a 42-month period. This limitation could discourage service editors from investing in the production of European or EOF works. Today, service editors who invest in new production, which is more costly than simply buying rights, negotiate long rights and a large number of diffusions. If this possibility were to be restricted by the new texts, it is to be feared that in future these publishers would only meet their production obligations by purchasing rights, which would be regrettable.
In addition, the capital thresholds used to qualify dependence appear too low and should be raised to the blocking minority threshold, i.e. 33.34%, as the 15% rate runs the risk of artificially increasing the number of dependent production companies.
Lastly, the Conseil points out that the qualification of independence will be very delicate for rights purchases, which should represent the main mode of contribution to the production of cable and satellite television services.
If these criteria were to be maintained, the envisaged level of two-thirds independent production would be unlikely to be achieved for the vast majority of cable and satellite services.
2. Basis for production obligations
Although the law of August 1, 2000 made provision for cable and satellite channels to be subject to production obligations, the Conseil points out that the economics of these channels remain extremely fragile, and that this increase in their obligations risks compromising their development, and in some cases even jeopardizing their survival.
With regard to the methods adopted, the channels' production obligations are based on their net annual sales for the previous financial year, which include resources received from service distributors.
Determining this base will require considerable clarification of the financial situation of certain services, published by the same artificial person and currently subject to joint accounting. A requirement for transparent accounting, with separate accounts for each service, should be imposed on the joint editor of several services.
Where there is a situation of control between the service editor and the distributor, article 10 of the draft decree specifies that these resources are deemed to be not less than half the subscription revenue and, if the service is the subject of a group subscription, not less than "half the resources derived from the subscription divided by the number of services".
The Conseil points out that this method of determining the tax base could lead to unfair situations, in the event of significant disparities in sales between services marketed jointly, or for the same services marketed by different distributors.
In any case, it would be useful to clarify the notion of bundled subscriptions, particularly in relation to basic supplies. In addition, the case of bundled subscriptions should also be considered for cinema channels, in article 17, as these can be the subject of a specific contract for several services of this type.
3. Gradual increase in coverage
Article 33-1 of the law stipulates that cable and satellite channel agreements "may, within the limits set by the decree provided for in article 33, make provision for a gradual increase in the number of households receiving or able to receive this service, without this period exceeding five years."
Article 12, II of the current "cable and satellite" decree allows the Conseil to make provision for this ramp-up "depending in particular on the number of households receiving the service and the nature of its programming", giving the Conseil considerable flexibility in its assessment.
Conversely, article 11 and II of article 13 of the draft decree limit this option to services whose "number of subscribers" is less than 2 million. Thus, on the one hand, the draft decree retains the sole criterion of the number of subscribers, whereas the law allows other criteria to be retained, and on the other hand, it sets a single threshold, which reduces the Conseil's room for maneuver.
In the Conseil's view, this criterion is insufficient to assess investment capacity in production, and difficult to apply, given the fluctuating nature of the number of cable and satellite subscribers. On these media, the very notion of subscriber can give rise to a variety of performers, given the different subscription formulas on offer (inclusion in the basic supply or specific contract, taking into account the number of households having subscribed or the number of people receiving the supplies). The Council would therefore like to see these thresholds abolished at regulatory level, so that services can be ramped up in line with the agreement. Indeed, the agreement appears to be the only instrument that is sufficiently flexible to adapt, with the necessary responsiveness, to developments that are currently difficult to predict.
Should these thresholds nevertheless be retained in the decree, the notion of subscriber should in any case be defined in it.
4. Definition of "cinema" channels
As it indicated in its opinion on the draft "digital" decree, the Conseil considers that the definition of "cinema" channels in article 14 of the draft "cable and satellite" decree is too restrictive, in particular insofar as 75% of the resources for these services must come from service distributors.
5. Prime-time listening
Article 18(II)(3) of the draft decree sets peak listening hours at 18-24 h for the diffusion of cinematographic works, and leaves it to the agreement to set these hours for the diffusion of audiovisual works. As it indicated in its opinion on the draft "digital" decree, the Conseil believes that prime viewing hours should be set in the agreement on the basis of the service's programming and audience characteristics, and that the decree should only make provision for a basic regime setting these hours from 6 pm to 11 pm, corresponding to potential peak times.
6. Pay-per-view services
The Conseil is pleased to note that the rules governing pay-per-view services have been simplified, particularly as regards the diffusion schedule for cinematographic works. The Conseil would like to be able to grant, by agreement, derogations to the Saturday broadcasting ban between 6 pm and 11 pm, in return for a commitment from these services to respect the diffusion quotas for European works and original EOF in this window.
Article 21 II of the draft decree maintains the principle that "the agreement sets the minimum proportion of sales that this service devotes to the purchase of rights to show cinematographic works".
The very principle of calculating the obligation to invest in cinematic production on the basis of the service's total sales may seem questionable, insofar as the proportion of cinematic works in the program supply of these services is declining, in favor of sporting events, and all the more so as these services are also required to pay the rights holders of these works a remuneration proportional to the price paid by users.
However, insofar as the rate of this investment is a matter for agreement, the Council may take into account the proportion of sales generated by the cinema when setting the rate.
In any case, the Conseil considers that this obligation should apply exclusively to European cinematographic works of original French expression.
7. Foreign channels
The draft decree is divided into two titles. Title I deals with "Service editors subject to agreement" and Title II with "Service editors subject to prior declaration" (channels falling within the competence of another Member State of the European Community or signatory to the Agreement on the European Economic Area).
Title I itself is organized into two chapters, the first of which sets out the "Provisions applicable to service editors established in France", the second the "Provisions applicable to service editors falling within the competence of another State".
The latter qualification does not appear to be consistent with the jurisdictional rules set out in the Television without Frontiers Directive and reproduced in articles 43-2 to 43-5 of the Act. The Council proposes to replace it with the following heading: "Provisions applicable to service editors established in another State", in this case foreign channels falling within the competence of France, in application of the technical criteria set out in article 43-4 of the law.
Beyond the question of the title of this chapter, one of its articles raises major difficulties. This is article 34, which makes provision for agreements with "television service editors established in a State which is not a member of the European Community, is not a signatory to the Agreement on the European Economic Area and is not a party to the European Convention on Transfrontier Television to lay down the conditions for compliance with the rules applicable to advertising, sponsorship, teleshopping, self-promotion, production and diffusion of works".
This article thus seems to allow the French Superior Audiovisual Council to adjust these obligations, without in any way providing a framework for such adjustments, and in particular without laying down any criteria or minimum obligations.
The Conseil points out that, to be compatible with article 33 of the law and recital 29 of the directive of June 30, 1997 amending the Television without Frontiers directive of October 3, 1989, the decree should base any contractual derogations on a linguistic criterion and not on a nationality criterion.
He also points out that, although the text itself opens up a wide range of possibilities for adjustments, these will necessarily be limited in the case of advertising, sponsorship, teleshopping and self-promotion.
In these areas, neither the directive nor the law makes provision for derogations; consequently, contractual adjustments can only concern provisions specific to France and falling under the regulatory level, such as prohibited sectors.
8. Regime governing French channels intended for non-Community diffusion
In order to protect legitimate national interests, the French legislator has chosen to make provision for a more restrictive regime for television services than that laid down a minima in the Television without Frontiers Directive.
These obligations, designed for diffusion in France, unnecessarily penalize services intended exclusively for diffusion on extra-Community markets.
To encourage the development of these services, the Conseil considers that they should be exempted from a certain number of obligations, notably concerning areas where advertising is prohibited and the diffusion schedule for cinematographic works.
9. Effective date of the draft decree
Article 42 makes provision for the draft decree to come into force on January 1, 2002, and specifies that agreements must be reviewed before this date, as necessary.
The introduction of production obligations will require the modification of almost all agreements (around one hundred), which will not be possible before January 1, 2002 if the decree is published around December 15, as is currently made provision for.
In view of the heavy burden that the production obligations will entail for cable and satellite services, and the fact that these obligations must be assessed over a calendar year, the Conseil is in favor of the production obligations only taking effect from January 1, 2003.